Portfolio Update
The FiveTwenty portfolio received $148.47 in dividends in the past week. PEP and TROW paid their quarterly dividends during the week.
| Past Week Dividend | $148.47 |
| Current Quarter Dividend (Q2 2023) | $2,292.72 |
| LifeTime Dividend | $12,466.30 |
| Estimated Annual Dividend | $9,814.00 |
The capital allocation for the week of 07/02/2023 to 07/08/2023 will be used to add to our position in Walgreens Boots Alliance (NASDAQ: WBA)
WBA – Position Update
Since our last check-in on WBA in week 2 of 2023, the company reported Q2 2023 earnings on 03/28/2023, and Q3 2023 earnings on 06/27/2023. In addition, the share price decreased 22.2% from $36.61 to $28.49.
| TTM | Prev. Update | 10-year median | |
| Dividend Streak | 47 years | 47 years | |
| Yield | 6,74% | 5.44% | 2.4% |
| Payout Ratio | 46.60%1 | 42.57%2 | |
| P/E | 6.921 | 8.122 |
1 computed using TTM adjusted EPS of $4.12 as of Q3 2023
2 computed using TTM adjusted EPS of $4.51 as of Q1 2023
Q3 2023 earnings report
Did WBA’s latest earnings report raise any warning flags?
In Q3 2023, WBA had good topline growth compared to the year ago period, driven by growth across all 3 of its operating segments. US Retail Pharmacy grew 4.4%, International was up 5.0%, and US Healthcare grew sales by 22%. However, quick expansion of the US Healthcare segment also increased that segment’s bottom-line losses, resulting in a slower growth rate for the company’s bottom-line.
Overall, revenue grew 8.6%, adjusted net income increased 3.1%, and adjusted EPS were 4.2% higher compared to the year-ago period.
| Revenue (in millions) | Adj. Net Income (in millions) | Adj. EPS . | |
| Q3 2022 | $32,597 | $834 | $0.96 |
| Q3 2023 | $35,415 | $860 | $1.00 |
| % Change | 8.6% | 3.1% | 4.2% |
Additional noteworthy developments during the quarter:
- WBA raised $1.9 billion from monetizing a portion of holdings in AmerisourceBergen and the sale of its remaining shares in Option Care Health.
- On 03/31/2023 it completed the full acquisition of CareCentrix for ~$380 million.
Looking ahead, WBA lowered its FY 2023 adjusted EPS guidance to $4.00 to $4.05 from $4.45 to $4.65 citing uncertain economic macroeconomic conditions and weakening consumer spending. It also raised the target for its cost savings program to $4.1 billion by 2024.
Thesis
Why are we adding to our position in WBA?
Following the Q3 2023 earnings announcements WBA’s share price got hammered due to the weak projects for the rest of FY 2023 and FY 2024. At current valuation we believe that the stock has overcorrected and is bound to bounce back in the near term.
For the long term, we believe that the company’s strategy of expanding into the healthcare business makes sense and will be a good growth engine. The speed and execution of this expansion creates some risks for the financial performance in the short term. So, there is a non-zero risk that the share price could drop further before starting to recover.
Nevertheless, we will add to our position and continue to closely watch developments.
Previous Articles
- 2023 Week 2: Walgreens Boots Alliance (NASDAQ: WBA)
- 2022 Week 29: Walgreens Boots Alliance (NASDAQ: WBA)
- 2022 Week 14: Walgreens Boots Alliance (NASDAQ: WBA)
- 2021 Week 39: Walgreens Boots Alliance (NASDAQ: WBA)
- 2021 Week 7: Walgreens Boots Alliance (NASDAQ: WBA)
Additional Research
- Walgreens Boots: Discounted To 2010 Lows – Is It A Value Trap Here? (NASDAQ:WBA) | Seeking Alpha
- Walgreens Boots’ (WBA) Q3 Earnings Miss Estimates, Margins Down (yahoo.com)
- Is WBA preparing to put Boots back up for sale? – Global Cosmetics News
Photo by Nathaniel Yeo on Unsplash